The Syrian pound has rebounded from an all-time low struck earlier in March after authorities tightened controls on bank withdrawals and internal transfers and restricted movement of cash around the country to stop dollar hoarding, bankers and business people said on Sunday.
Traders said the pound was trading around 3,500 to the US dollar on Sunday, its strongest level for a month. On Saturday, it rose 12 percent, reversing losses that sent the currency to an all time low of 4,000 earlier in March.
Bankers and business people said the pound’s surge came shortly after the Central Bank of Syria told banks last week to cap withdrawals at 2 million pounds ($572) from an earlier limit of 15 million pounds.
The Central Bank also acted to curb movement of cash within provinces to up to 5 million pounds and imposed a ceiling of up to one million pounds on transfers within government-held areas to reduce the demand for dollars, they said.
“It dried up liquidity from peoples’ hands and naturally the dollar exchange rate went down, it’s supply and demand,” one senior businessman familiar with central bank policy said by phone from Damascus.
“The problem is that this is an artificial way of propping up the pound,” the businessman, who requested anonymity on the moves to stem the increasing dollarisation of an economy crippled by a decade of war.
The currency’s fall has driven up inflation and aggravated hardship as Syrians struggle to afford food, power and other basics.
The pound had traded at 47 to the dollar before protests against Syrian President Bashar al Assad’s rule erupted in March 2011.
Businessmen and bankers said the new restrictions, which also included a security crackdown on exchange dealers blamed for the currency’s fall, were poorly-planned and would backfire.
“You cannot keep stopping withdrawals for a longer period – in the end how can the economy function if you cannot withdraw money?” said one prominent trader who requested anonymity.
“Two exchange dealers said security forces last week arrested dozens of dealers and confiscated millions of dollars in Aleppo, Hama and in the capital,” said one banker who requested anonymity.
Bankers said the central bank, which has largely abandoned efforts to support the currency, has also cut non-essential imports in the last two months to preserve remaining foreign currency.